The A-Z of Cell Towers Lease Negotiations

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Learn about what makes a wireless deployment strategy successful

Wireless carriers and cell tower companies select locations for new cell site builds based upon an urgent need for a specific amount of coverage and capacity. Cell towers and cell sites are engineered to provide adequate coverage (range of signal) to a specific number of people within a given market, but providing coverage is not enough. The capacity (bandwidth) must be sufficient to meet the demands of the population that is covered. Filling gaps in coverage and capacity is a major factor in wireless carrier competition.

How are cell tower lease rates determined?

The rent paid to cell tower landlords is often referred to as the “lease rate” and is typically paid monthly. Lease rates vary contingent upon a number of factors, such as: the number of tenants in operation on the tower; whether the tower is in a rural or urban neighborhood; and the ease or difficulty at which a new cell tower could be built on a different parcel of land. Additionally, some wireless carriers and tower companies offer better rates than others from the get go.

When is the best time to renegotiate my cell site lease?

Many cell tower leases that originated in the 80s and 90s are presently coming up for renewal. It’s important to realize that the closer a lease is to its expiration date, the more valuable it is – if in fact, the Lessee does not wish to terminate the lease altogether. Relocating cell sites can be very costly and companies would prefer not to do so unless they have to. In some cases, your lease may have been undervalued from its conception. If you’d like help determining the fair market value of your lease going forward, please contact us.

Collocation is when multiple tenants share space on one tower.

The FCC as well as a large number of counties and municipalities have stated that they prefer wireless carrier to collocate on towers, rather than building distinct, separate cell towers. Municipalities do this for two main reasons: 1. To keep the aesthetics of the town landscape and skyline clean; and 2.To minimize questions from the public regarding the health and safety of cell towers. When wireless carriers collocate space on a tower, they are effectively sharing the tower and its utility source. It’s typically, but not always the case, that the number of tenants collocating on a cell tower will influence the overall lease rate paid to the landlord.

What is a rooftop lease?

Rooftop leases are agreements between a building owner, business owner or government entity that enables wireless carriers to deploy cell sites and antennas on the rooftop of a building. Rooftop leases are very common and are often used as fillers to close gaps in coverage in densely populated areas. However, they are also sometimes used for coverage in areas where cell towers are not allowed (due to zoning ordinances) or in rural areas. As they are cheaper to build, rooftop leases often demand cheaper rent than traditional macro towers do. Additionally the size of the cells deployed on rooftops are often (but not always) smaller than macro cell sites located on cell towers.

Cell Tower Valuation and Brokerage

With the exception of some municipal situations, there are very few scenarios where a tower owner is better off divesting assets (selling leases but keeping the tower). If you are a tower owner and wish to sell your leases, you should consider selling the tower, as well.If you are a small tower owner who is in need of liquid cash flow, you could consider selling your tower subsequent to a Leaseback Agreement. This would allow you to retain the right to use the tower, even after it was sold. Additionally, it’s important to keep in mind that broadcast tower leases cannot be appropriately valued using standard cell tower metrics. At the end of the day, they are worth more.

Many municipalities and other public entities, such as parks; schools; housing authorities or public utilities, who maintain cell site or water tower leases, have been approached by companies who are interested in “buying out” their leases. These companies include, Unison Site, Crown Castle, Wireless Capital Partners and American Tower.For some, these offers represent a quick and potentially sizeable infusion of cash without a burden to taxpayers (or constituents). We understand that the capitalization of the cell phone tower or water tower cell site leases can be an attractive way to increase revenue, but we cannot recommend selling these leases blindly. Please remember the first offer you receive is almost never the final offer that these companies will settle for.

Many cell tower leases contain a “sublease” clause. Typically the wireless carrier or cell tower company will request the right to sublease as it sees fit, without needing to ask for the Landlord’s permission. The area that is subleased is the ground space where equipment is located, as opposed to space on the tower itself. Depending on how strong the demand is to locate on your property, you may or may not be able to demand fees from the wireless carriers for any new sublease agreements they engage in. A third type of lease is a “Lease Expansion Agreement,” and this occurs when the original tenant wants to increase the ground space footprint for its own needs as opposed to the needs of a subletter.

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